What made PayPal's stablecoin market value exceed $1 billion?

Author: Krisztian Sandor, CoinDesk; Compiler: Tao Zhu, Golden Finance

• PayPal’s PYUSD supply hits $1 billion, according to CoinMarketCap.

• The stablecoin has benefited from its expansion into the busy Solana ecosystem, with its supply on the network now exceeding that on the Ethereum blockchain.

• 21.co’s Tom Wan said DeFi protocols’ yield incentives played a “huge role” in the growth.

CoinMarketCap shows that the stablecoin PYUSD from payment giant PayPal (PYPL) surpassed the $1 billion mark in market value last week.

PYUSD, which is issued in conjunction with fintech company Paxos, achieved the milestone as its supply more than doubled since June.

While the overall cryptocurrency market cooled during the summer doldrums, PYUSD also saw a surge in user activity. Monthly active wallet addresses rose to 25,000 in July from 9,400 in May, according to a stablecoin dashboard created by Visa using Alluvium.

Last year, PayPal's entry into the stablecoin space was hailed as a "watershed" for the entire cryptocurrency industry, with observers expecting the token to eventually compete with stablecoin giants Circle's USDC and Tether's USDT. However, early enthusiasm faded as the token's growth on the Ethereum (ETH) network gradually weakened. Subsequently, PYUSD expanded to the Solana (SOL) network in late May.

The supply of tokens on Solana has increased from zero to $650 million in three months, surpassing Ethereum. DefiLlama data shows that in the past month, the supply of PYUSD on Solana has increased by 171% and is rapidly approaching Tether's USDT on the network.

Tom Wan, business development and strategy associate at digital asset investment product company 21.co, said that "incentives have played a huge role in PYUSD's recent growth." He added that integration with decentralized finance (DeFi) protocols has also helped.

Solana-based protocols Kamino, Drift and Marginfi have all introduced higher rewards for PYUSD deposits, offering double-digit annualized yields to token holders. Recently, cryptocurrency custodian Anchorage Digital also launched PYUSD deposit rewards to institutions last week.

However, concerns remain about how PYUSD’s growth will be sustainable if the incentives are phased out.

“My sense is that these incentives are unsustainable, but they are not designed to last forever,” noted David Shuttleworth, partner at research firm Anagram. “Part of the idea here is to get more PYUSD in circulation and get users, especially new users, active in the Solana ecosystem on-chain.”